Moody's Investors Service, a global integrated risk-assessment firm, on Monday placed seven Bangladeshi banks' long-term ratings and assessments on review for downgrading purposes.
The US-based agency released its ratings on its website from Singapore.
On the review list are Brac Bank, City Bank, Dutch-Bangla Bank, Eastern Bank, NCC Bank, Premier Bank and Mercantile Bank.
Moody's has also downgraded Social Islami Bank Limited's (SIBL) long-term foreign-currency-deposit ratings to B3 from B2 and the bank's Baseline Credit Assessment (BCA) to caa1 from b3.
The rating agency has also changed the rating outlooks, where applicable, to stable from negative, according to Moody's release.
The decision to place the ratings and assessments of seven Bangladeshi banks on review for downgrade is driven by Moody's placement of Bangladesh's Ba3 sovereign rating on review for downgrade on December 9, it also said.
Bangladesh's sovereign credit strength is a key input in Moody's assessments of bank ratings because the country's credit strength affects the government's capacity to provide support to the banks in times of stress.
If Moody's were to downgrade Bangladesh's sovereign rating, it will likely result in lower long-term ratings for the banks.
The rating action also considers the deterioration in the country's foreign-exchange reserves and the central bank's measures to limit foreign-currency outflows, which have tightened foreign-currency liquidity in the banking system, the ratings revealed.
During the rating review, Moody's will assess if the efforts instituted by the central bank and individual banks to improve their foreign-currency liquidity, such as limiting the opening of new letters of credit and efforts to attract remittances, will help to improve the banks' foreign-currency liquidity to support their obligations, Moody's said in its ratings report.
Given the review for downgrade, the seven banks' BCAs and long-term ratings are unlikely to be upgraded during the review period.
Nonetheless, Moody's could confirm the ratings if Bangladesh's sovereign rating is maintained at Ba3 and the banks' standalone credit strengths remain unchanged, it added.